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Presidential Candidates' Energy Advisers Spar Over Drilling

Democratic presidential candidate Sen. Barack Obama (D-IL) will be looking for a comprehensive, bipartisan approach on energy measures, encompassing development and drilling for conventional resources as well as energy efficiency, renewables and mitigating energy costs, a senior energy adviser told the Natural Gas Roundtable in Washington, DC, last Thursday.

While Obama has signaled that he would support expanded oil and natural gas drilling on the Outer Continental Shelf (OCS), "discussions need to continue on a bipartisan basis for a comprehensive approach that includes not just the best approach to developing our offshore resources, but what are we going to do with regard to efficiency, renewables and assistance to Americans and small businesses in meeting the challenges of their high energy bills," Obama adviser Elgie Holstein said.

"Sen. Obama has said that although he is opposed to drilling in the Arctic National Wildlife Refuge [ANWR], he is open to the idea of expanding [drilling], including in the moratorium areas and certainly in those areas like the NPR-A [National Petroleum Reserve of Alaska] and the other areas that have not been previously subject to moratoria. But in the moratorium areas he feels that his openness to drilling in those areas needs to be part of a sort of bipartisan agreement" on a broad range of energy issues, he said.

Holstein had been asked whether, if he is elected president, Obama would refrain from reinstating presidential restrictions on offshore activity and/or urge Congress to follow suit. "I don't think the campaign has answered that question. He hasn't spoken on that issue so as his representative I can't [comment]." It appeared, however, that calling for a bipartisan, comprehensive approach would rule out any swift unilateral action on the presidential ban.

In July, President Bush removed the presidential ban that placed the East and West Coasts and parts of the eastern Gulf of Mexico off limits to leasing and drilling activity (see NGI, July 21). And the congressional moratorium on leasing in those areas expired on Sept. 30, leaving the OCS free of restrictions for the first time in decades (see NGI, Oct. 6). The energy industry is now waiting on the sidelines to see if the new president and new Congress will reinstate those bans, either partially or fully. When it returns in January, Congress is expected to take up legislation that, among other things, would lay the ground rules for drilling in the OCS areas that were previously subject to moratorium.

On the Republican side, John McCarrick, policy adviser for presidential candidate Sen. John McCain (R-AZ), said that as to opening up the offshore areas, "it's going to be up to the states" to decide whether to allow leasing off their shores.

McCain "is against opening up ANWR. ANWR is called a national refuge for a reason and he believes in it...It's not that we couldn't drill safely in ANWR. He just doesn't want to open up that area," McCarrick said.

In the course of the mini-debate, Obama's energy adviser accused McCain of being "all over the map" on drilling. "He's for expanding America's domestic resources, particularly in the Outer Continental Shelf areas, but he's against [drilling] in the Arctic National Wildlife Refuge. He's for expanding in the previous moratorium areas, but not if the states disapprove. He's for expanding offshore drilling but not in the Great Lakes."

McCarrick said McCain opposes the Democrats' "use-it-or-lose-it" proposal for leasing -- producers that don't diligently and quickly pursue leases would lose them. "The idea that the Obama campaign wants to force the energy companies to go [to] places where it's hard to get oil rather than letting them go to the places where it's easier to get oil right now and we could use it just sounds strictly counterintuitive."

Holstein acknowledged that Obama's plan to impose a windfall profits tax on producers has lost some of its steam, given the steep slide in crude oil and natural gas prices."That was his proposal, but of course oil prices have been declining so that may obviate at least some of the need [for it]. It would certainly reduce the extent to which a windfall profits tax would apply," he said.

A windfall profits tax "is a terrible idea," countered McCarrick. "It's not going to happen," he said, referring to pledges that the tax would be used to reduce the energy costs to consumers.

The representatives from the Obama and McCain camps also squared off on the issue of a cap-and-trade program to help reduce heat-trapping greenhouse gas emissions. McCain supports a cap-and-trade program, which would reduce emissions by 60% by 2025, and offer banking and borrowing, with unlimited offsets, said McCarrick. He called Obama's proposal to reduce emissions by 80% "unworkable."

Holstein blasted McCain's proposal calling for a "crash program" to build 42 new nuclear power plants. McCarrick countered that the International Energy Agency has estimated that 1,200-1,400 new nuclear plants need to be built worldwide to substantially reduce carbon emissions and constrain prices. Absent the construction of the nuclear projects proposed by McCain, McCarrick said the United States is looking at the price of electricity "going up five times the amount it would go up otherwise."

In related action Obama last Monday unveiled a new economic plan aimed at rescuing middle-class citizens hit by the financial crisis, including providing supplemental funding to help needy customers in cold weather states pay their energy bills during the upcoming heating season.

The wide-ranging plan focuses on help for U.S. taxpayers who are facing mortgage foreclosures, increased unemployment and higher energy prices this winter.

"Our country faces its most serious economic crisis since the great depression. We have lost 760,000 jobs this year and some leading forecasters project that the unemployment rate will exceed 8% by the end of 2009. Working facilities, who saw their incomes decline by $2,000 in the economic 'expansion' from 2000 to 2007, now face even deeper income losses," Obama said during an economic policy address in Toledo, OH.

A part of his economic plan includes $25 billion in fiscal relief for states. A portion of the funds would be earmarked for the Low Income Home Energy Assistance Program (LIHEAP) to help those who can't meet their heating bills. Obama did not say what part of that $25 billion would be set aside for LIHEAP.

Obama's proposed supplemental funding would be in addition to the record $5.1 billion for LIHEAP that Congress recently approved, which will allow states to increase the number of families served by the program to 7.8 million from 5.8 million.

Obama's pledge of greater LIHEAP funding comes as the Energy Information Administration (EIA) predicts that average household heating expenditures for the upcoming winter season will likely be 15% more than last winter, increasing from an estimated $986 spent a year ago to a projected $1,137 (see NGI, Oct. 13).

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